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What are the annual projected free cash flows

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1. What are the annual projected free cash flows?

2. What is the value of the project assuming the firm was entirely equity financed?

3. What is the value of the project using the Adjusted Present Value (APV) approach, assuming the firm raises $750 thousand of debt to fund the project and keeps the level of debt constant in perpetuity?

4. How does your answer for question 3 changes if the firm must pay the debt at the end of the project life (at the end of 2006)?

5. Value the project using the Weighted Average Cost of Capital (WACC) approach assuming the firm maintains a constant 25% debt-to-market value ratio in perpetuity

6. Value the project using the Flow to Equity (FTE) approach assuming the firm raises 750 thousand of debt to fund the project and keeps the level of debt constant in perpetuity?

7. How does your answer for question 6 changes if the firm must pay the debt at the end of the project life (at the end of 2006)?

8. How do the values from the all equity (question 2), APV (question 3), WACC (question 5), and FTE (question 6) approaches compare? How do the assumptions about financial policy differ across the three approaches?

Reference no: EM133059928

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